Which of the Following Is an Example of 'Arbitrage

question 57

Multiple Choice

Which of the following is an example of 'arbitrage'?

• A)An investor, seeing that the price of palladium on the metals exchange in two different countries is slightly different, buys on one and sells on the other to make a profit.
• B)An inventor of a new hydrocarbon cracking technology based on palladium buys this metal knowing that its price will rise when the technology is adopted.
• C)A firm buys $250 000 of palladium today, with an option to sell it at $275 000 in one year if interest rates rise above 10%.
• D)A metals merchant is offered $108 000 in one year for $100 000 of palladium today, when the interest rate is 10%.

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Definitions:

Total Fixed Costs

The sum of all costs required to produce any output, assuming they remain constant regardless of the level of production.

Fixed Costs

are expenses that do not change in response to the level of goods or services produced by a business, like rent or salaries.

Variable Costs

Expenses that change in proportion to the production or sales figures.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and labor expenses.